Different types of Mutual Funds that you can buy in India

By the term ‘Mutual Funds’, we mean the money pooled out through the contribution of many investors who intend to save and make money through their investments. The corpus thus created with the investment of these individuals is then invested in different categories namely debt funds, liquid assets and others. The individuals investing in mutual funds have to share the profits and losses equally in proportion to the value of their contribution to the corpus of the mutual funds. Here are the different kinds of mutual funds in India.

Mutual fund types based on asset class

Equity funds

Equity funds are those that are invested in stocks or shares of different companies. Since these investments can provide higher results, they are also called as high risk funds.

Debt funds

Debt funds are those that are invested in debt such as government bonds, fixed income assets and company debentures. These are considered as safe investment options since they provide fixed retruns to the investors.

Money market funds

Money market funds are those that are invested in liquid instruments. Some examples to this type are CPs and T-bills. These are also deemed as safe investment options since you will get an immediate return on your investment though the returns might be moderate.

Balanced or hybrid funds

Hybrid funds also called as balanced funds are invested in different kinds of asset classes. When the proportion of debts are found lower than the equity or when the equity is found lower than the proportion of debts, this kinds of funds enable striking a balance between risks and returns.

Sector funds

Sector funds are those kinds of investments in which the investor chooses to invest in a particular sector or the division of the market. For example, infrastructure fund investors invest in sectors confined to the infrastructure. They might also choose the investment instruments offered by the infrastructure companies. Returns on sector funds investments are directly related to how the given sector performs. The risk factor with regard to these investments vary between sectors.

Index funds


Index funds are investment tools that represent a specific index on the stock exchange for the purpose of monitoring the returns and how the index moves. In other words, it is like purchasing shares from the BSE Sensex.

Tax-saving funds

Tax-saving funds are those that are invested predominantly in equity shares. Tax-saving funds enable an investor to claim the tax deductions under the income tax act. The risk factors that are involved in such kinds of investments are very high. Also, in case these funds perform well, higher returns are possible. The tax saving aspect is one of the major attractions connected with these kinds of investments. Those that are willing to take high risks for the sake of inviting higher returns prefer this model.

Funds of funds

Funds of funds are those that are invested in other mutual funds. The returns on such investments depend on how the target funds perform on the whole.
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